10-Q 1 aldx-20240630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36332

ALDEYRA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

20-1968197

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

131 Hartwell Avenue, Suite 320

 

 

Lexington, MA

 

02421

(Address of principal executive offices)

 

(Zip Code)

 

(781) 761-4904

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

ALDX

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company or an emerging growth company. See the definitions of the “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of July 29, 2024, there were 59,421,551 shares of the registrant’s common stock issued and outstanding.

 

 

 


 

Aldeyra Therapeutics, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2024

INDEX

 

 

Page

PART I – FINANCIAL INFORMATION

ITEM 1.

Condensed Consolidated Financial Statements:

3

Consolidated Balance Sheets at June 30, 2024 (Unaudited) and December 31, 2023

3

Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (Unaudited)

4

Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 (Unaudited)

5

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (Unaudited)

6

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

28

ITEM 4.

Controls and Procedures

28

PART II – OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

29

ITEM 1A.

Risk Factors

29

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

ITEM 3.

Defaults Upon Senior Securities

76

ITEM 4.

Mine Safety Disclosures

76

ITEM 5.

Other Information

76

ITEM 6.

Exhibits

77

Signatures

78

 

2


 

Part I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

 

 

 

 

 

 

2024

 

 

December 31,

 

 

 

(unaudited)

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,029,723

 

 

$

142,823,016

 

Cash equivalent - reverse repurchase agreements

 

 

40,000,000

 

 

 

 

Marketable securities

 

 

49,301,960

 

 

 

 

Prepaid expenses and other current assets

 

 

5,317,836

 

 

 

4,987,317

 

Total current assets

 

 

125,649,519

 

 

 

147,810,333

 

Right-of-use assets

 

 

391,595

 

 

 

510,814

 

Fixed assets, net

 

 

2,720

 

 

 

5,764

 

Total assets

 

$

126,043,834

 

 

$

148,326,911

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

254,434

 

 

$

1,338,057

 

Accrued expenses

 

 

5,842,802

 

 

 

5,536,464

 

Current portion of debt

 

 

15,242,327

 

 

 

15,146,546

 

Operating lease liabilities

 

 

255,039

 

 

 

239,183

 

Deferred collaboration revenue

 

 

6,000,000

 

 

 

 

Total current liabilities

 

 

27,594,602

 

 

 

22,260,250

 

Deferred collaboration revenue, long-term

 

 

 

 

 

6,000,000

 

Operating lease liabilities, long-term

 

 

138,893

 

 

 

271,631

 

Total liabilities

 

 

27,733,495

 

 

 

28,531,881

 

Commitments and contingencies (Notes 3, 9, & 14)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 15,000,000 shares authorized, none
   issued and outstanding

 

 

 

 

 

 

Common stock, voting, $0.001 par value; 150,000,000 authorized and
  
59,414,489 and 59,195,951 shares issued and outstanding, respectively

 

 

59,415

 

 

 

59,196

 

Additional paid-in capital

 

 

517,449,424

 

 

 

513,994,982

 

Accumulated other comprehensive loss

 

 

(9,658

)

 

 

 

Accumulated deficit

 

 

(419,188,842

)

 

 

(394,259,148

)

Total stockholders’ equity

 

 

98,310,339

 

 

 

119,795,030

 

Total liabilities and stockholders’ equity

 

$

126,043,834

 

 

$

148,326,911

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,969,743

 

 

$

6,962,907

 

 

$

21,153,251

 

 

$

18,198,767

 

General and administrative

 

 

3,038,064

 

 

 

3,379,750

 

 

 

6,248,420

 

 

 

8,947,167

 

Loss from operations

 

 

(18,007,807

)

 

 

(10,342,657

)

 

 

(27,401,671

)

 

 

(27,145,934

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,637,836

 

 

 

1,882,800

 

 

 

3,448,105

 

 

 

3,561,685

 

Interest expense

 

 

(477,601

)

 

 

(527,141

)

 

 

(976,128

)

 

 

(1,018,428

)

Total other income, net

 

 

1,160,235

 

 

 

1,355,659

 

 

 

2,471,977

 

 

 

2,543,257

 

Net loss

 

$

(16,847,572

)

 

$

(8,986,998

)

 

$

(24,929,694

)

 

$

(24,602,677

)

Net loss per share - basic and diluted

 

$

(0.28

)

 

$

(0.15

)

 

$

(0.42

)

 

$

(0.42

)

Weighted average common shares outstanding - basic and diluted

 

 

59,414,489

 

 

 

58,791,920

 

 

 

59,414,489

 

 

 

58,791,762

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(16,847,572

)

 

$

(8,986,998

)

 

$

(24,929,694

)

 

$

(24,602,677

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized (loss) on marketable securities

 

 

(6,629

)

 

 

 

 

 

(9,658

)

 

 

 

Reclassification of losses to net loss

 

 

 

 

 

 

 

 

 

 

 

103,938

 

Total other comprehensive (loss) income

 

$

(6,629

)

 

$

 

 

$

(9,658

)

 

$

103,938

 

Comprehensive loss

 

$

(16,854,201

)

 

$

(8,986,998

)

 

$

(24,939,352

)

 

$

(24,498,739

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

 

 

Stockholders' Equity

 

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in Capital

 

 

Other
Comprehensive
Income/(Loss),
net of tax

 

 

Accumulated
Deficit

 

 

Total
Stockholders'
Equity

 

Balance, December 31, 2023

 

 

59,195,951

 

 

$

59,196

 

 

$

513,994,982

 

 

$

 

 

$

(394,259,148

)

 

$

119,795,030

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,436,470

 

 

 

 

 

 

 

 

 

3,436,470

 

Issuance of common stock, employee
   stock purchase plan

 

 

6,097

 

 

 

7

 

 

 

18,184

 

 

 

 

 

 

 

 

 

18,191

 

Issuance of common stock, vested
   restricted stock units

 

 

212,441

 

 

 

212

 

 

 

(212

)

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(9,658

)

 

 

 

 

 

(9,658

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,929,694

)

 

 

(24,929,694

)

Balance, June 30, 2024

 

 

59,414,489

 

 

$

59,415

 

 

$

517,449,424

 

 

$

(9,658

)

 

$

(419,188,842

)

 

$

98,310,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2022

 

 

58,560,078

 

 

$

58,560

 

 

$

507,770,045

 

 

$

(103,938

)

 

$

(356,716,638

)

 

$

151,008,029

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,316,058

 

 

 

 

 

 

 

 

 

3,316,058

 

Issuance of common stock, exercise
   of stock options

 

 

9,604

 

 

 

9

 

 

 

5,283

 

 

 

 

 

 

 

 

 

5,292

 

Issuance of common stock, employee
   stock purchase plan

 

 

16,272

 

 

 

17

 

 

 

52,542

 

 

 

 

 

 

 

 

 

52,559

 

Issuance of common stock, vested
   restricted stock units

 

 

215,253

 

 

 

215

 

 

 

(215

)

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

103,938

 

 

 

 

 

 

103,938

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,602,677

)

 

 

(24,602,677

)

Balance, June 30, 2023

 

 

58,801,207

 

 

$

58,801

 

 

$

511,143,713

 

 

$

 

 

$

(381,319,315

)

 

$

129,883,199

 

 

6


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

 

 

Stockholders' Equity

 

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in Capital

 

 

Other
Comprehensive
Income/(Loss),
net of tax

 

 

Accumulated
Deficit

 

 

Total
Stockholders'
Equity

 

Balance, March 31, 2024

 

 

59,414,489

 

 

$

59,415

 

 

$

515,704,325

 

 

$

(3,029

)

 

$

(402,341,270

)

 

$

113,419,441

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,745,099

 

 

 

 

 

 

 

 

 

1,745,099

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(6,629

)

 

 

 

 

 

(6,629

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,847,572

)

 

 

(16,847,572

)

Balance, June 30, 2024

 

 

59,414,489

 

 

$

59,415

 

 

$

517,449,424

 

 

$

(9,658

)

 

$

(419,188,842

)

 

$

98,310,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2023

 

 

58,791,603

 

 

$

58,792

 

 

$

509,516,738

 

 

$

 

 

$

(372,332,317

)

 

$

137,243,213

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,621,692

 

 

 

 

 

 

 

 

 

1,621,692

 

Issuance of common stock, exercise
   of stock options

 

 

9,604

 

 

 

9

 

 

 

5,283

 

 

 

 

 

 

 

 

 

5,292

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,986,998

)

 

 

(8,986,998

)

Balance, June 30, 2023

 

 

58,801,207

 

 

$

58,801

 

 

$

511,143,713

 

 

$

 

 

$

(381,319,315

)

 

$

129,883,199

 

 

7


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(24,929,694

)

 

$

(24,602,677

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,484,366

 

 

 

5,763,896

 

Non-cash interest expense

 

 

95,781

 

 

 

187,501

 

Net amortization of premium on marketable securities

 

 

(697,119

)

 

 

(14,542

)

Depreciation and amortization expense

 

 

122,263

 

 

 

131,312

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(330,519

)

 

 

2,918,672

 

Accounts payable

 

 

(1,083,623

)

 

 

137,191

 

Accrued expenses and other liabilities

 

 

141,560

 

 

 

(7,323,007

)

Net cash used in operating activities

 

 

(23,196,985

)

 

 

(22,801,654

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(60,614,499

)

 

 

 

Maturities of marketable securities

 

 

12,000,000

 

 

 

30,000,000

 

Net cash (used in) provided by investing activities

 

 

(48,614,499

)

 

 

30,000,000

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

-

 

 

 

5,292

 

Proceeds from employee stock purchase plan

 

 

18,191

 

 

 

52,559

 

Net cash provided by financing activities

 

 

18,191

 

 

 

57,851

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(71,793,293

)

 

 

7,256,197

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

142,823,016

 

 

 

144,419,364

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

71,029,723

 

 

$

151,675,561

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during the period for interest

 

$

884,500

 

 

$

823,521

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


 

ALDEYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.
NATURE OF BUSINESS

Aldeyra Therapeutics, Inc., together with its wholly-owned subsidiaries (the “Company” or “Aldeyra”), a Delaware corporation, is a clinical-stage biotechnology company devoted to discovering innovative therapies designed to treat immune-mediated and metabolic diseases.

The Company’s principal activities to date include research and development activities along with related general business planning, including raising capital.

2.
BASIS OF PRESENTATION

The accompanying interim condensed consolidated financial statements and related disclosures are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on March 7, 2024 (2023 Annual Report).

The financial information as of June 30, 2024, and the three and six months ended June 30, 2024 and 2023, respectively, is unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for the fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented, have been included. The balance sheet data as of December 31, 2023 was derived from audited consolidated financial statements. The results of the Company’s operations for any interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year.

 

Based on its current operating plan, and excluding any potential licensing and product revenue, the Company believes that its cash, cash equivalents and marketable securities will be sufficient to fund the Company's currently projected operating expenses and debt obligations for at least the next 12 months from the date the financial statements are issued. The Company has based its projections of operating capital requirements on its current operating plan, which includes several assumptions that may prove to be incorrect, and the Company may use all of its available capital resources sooner than the Company expects. The Company will need to secure additional funding in the future, from one or more equity or debt financings, collaborations, or other sources, in order to carry out all of the Company’s planned research and development activities and regulatory activities; commence or continue ongoing commercialization activities, including manufacturing, sales, marketing and distribution, for any of its product candidates for which the Company may receive marketing approval; or conduct any substantial, additional development requirements requested by the FDA. Additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to secure additional funding, it could be forced to delay, reduce, or eliminate its research and development programs and its reproxalap commercialization efforts, whether alone or with others.

Curtailment of operations would cause significant delays in the Company’s efforts to develop and introduce its products to market, which is critical to the realization of its business plan and the future operations of the Company.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions, including fair value estimates for investments that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. The Company’s management evaluates its estimates and assumptions on an ongoing basis. Management’s most significant estimates in the Company’s condensed consolidated financial statements include, but are not limited to, deferred and accrued research and development costs, stock-based compensation, and accounting for income taxes and related valuation allowance. Although these estimates and assumptions are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

9


 

Summary of Significant Accounting Policies

There were no changes to significant accounting policies during the six months ended June 30, 2024, as compared to those identified in the 2023 Annual Report.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses, including for single reportable segment entities. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is evaluating the disclosure requirements related to this new standard. However, given the Company has one reportable segment, this policy is not expected to have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the disclosure requirements related to this new standard.

3.
Helio Vision Acquisition

On January 28, 2019 (Closing Date), the Company acquired Helio Vision, Inc. (Helio) and thereby obtained rights to ADX-2191 pursuant to an Agreement and Plan of Merger dated as of January 24, 2019 (the Merger Agreement). As a result of the acquisition, the Company issued an aggregate of 1,407,006 shares of common stock to the former securityholders and an advisor of Helio, including 246,562 shares issued in January 2021, pursuant to the terms of the acquisition agreement. In addition, the Company, subject to the conditions of the acquisition agreement, is contingently obligated to make additional payments to the former securityholders of Helio as follows: (a) $10.0 million of common stock following approval by the FDA of a new drug application (NDA) for the prevention and/or treatment of proliferative vitreoretinopathy or a substantially similar label prior to the 10th anniversary of the Closing Date; and (b) $2.5 million of common stock following FDA approval of an NDA for an indication (other than proliferative vitreoretinopathy or a substantially similar label) prior to the 12th anniversary of the Closing Date (the shares of common stock issuable pursuant to the preceding clauses (a) and (b) are referred to herein as the Milestone Shares), provided that in no event shall the Company be obligated to issue more than an aggregate of 5,248,885 shares of common stock in connection with the Helio acquisition. If the Company ceases to use commercially reasonably efforts to develop and obtain regulatory approval for ADX-2191, subject to the terms and conditions of the Merger Agreement, ADX-2191 and related intellectual property rights may revert back to an entity designated by the representative of the former Helio stockholders. Additionally, in the event of certain change of control or divestitures by the Company, certain former convertible noteholders of Helio will be entitled to a tax gross-up payment in an amount not to exceed $1.0 million in the aggregate.

The Company determined that liability accounting is not required for the Milestone Shares under FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480). The Company also determined that the Milestone Shares meet the scope exception as a derivative under FASB ASC Topic 815, Derivatives and Hedging (ASC 815), from inception of the Milestone Shares through June 30, 2024. Accordingly, the Milestone Shares are evaluated under FASB ASC Topic 450, Contingencies (ASC 450) and the Company will record a liability related to the Milestone Shares if the milestones are achieved, and the obligation to issue the Milestone Shares becomes probable. At such time, the Company will record the cost of the Milestone Shares issued to the Helio founders as a compensation expense and to the other former securityholders of Helio as an in-process research and development expense if there is no alternative future use. No milestones related to the remaining Milestone Shares are considered probable of being achieved as of June 30, 2024.

10


 

4.
NET LOSS PER SHARE

For the three and six months ended June 30, 2024 and 2023, diluted weighted average common shares outstanding is equal to basic weighted average common shares due to the Company’s net loss position.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:

 

 

 

For the Three and Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

Options to purchase common stock

 

 

8,033,741

 

 

 

6,567,153

 

Nonvested restricted stock units

 

 

732,056

 

 

 

1,208,100

 

Total of common stock equivalents

 

 

8,765,797

 

 

 

7,775,253

 

 

5.
CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

At June 30, 2024, cash, cash equivalents, and marketable securities were comprised of:

 

 

 

Carrying
Amount

 

 

Unrecognized
Gain

 

 

Unrecognized
Loss

 

 

Estimated
Fair Value

 

 

Cash and Cash
Equivalents

 

 

Current
Marketable
Securities

 

Cash

 

$

3,434,204

 

 

$

 

 

$

 

 

$

3,434,204

 

 

$

3,434,204

 

 

$

 

Money market funds

 

 

27,595,519

 

 

 

 

 

 

 

 

 

27,595,519

 

 

 

27,595,519

 

 

 

 

Reverse repurchase agreements

 

 

40,000,000

 

 

 

 

 

 

 

 

 

40,000,000

 

 

 

40,000,000

 

 

 

 

Total cash and cash equivalents

 

$

71,029,723

 

 

$

 

 

$

 

 

$

71,029,723

 

 

$

71,029,723

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

 

49,311,618

 

 

 

486

 

 

 

(10,144

)

 

 

49,301,960

 

 

 

 

 

 

49,301,960

 

Available for sale marketable securities (1)

 

 

49,311,618

 

 

 

486

 

 

 

(10,144

)

 

 

49,301,960

 

 

 

 

 

 

49,301,960

 

Total cash, cash equivalents, and current marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

71,029,723

 

 

$

49,301,960

 

 

(1)
Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes, if material, in other comprehensive income.

 

The contractual maturities of all available for sale securities were less than one year at June 30, 2024.

 

At December 31, 2023, cash, and cash equivalents were comprised of:

 

 

 

Carrying
Amount

 

 

Estimated
Fair Value

 

 

Cash and Cash
Equivalents

 

 

Cash

 

$

128,510,451

 

 

$

128,510,451

 

 

$

128,510,451

 

 

Money market funds

 

 

14,312,565

 

 

 

14,312,565

 

 

 

14,312,565

 

 

Total cash and cash equivalents

 

$

142,823,016

 

 

$

142,823,016

 

 

$

142,823,016

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no marketable securities held at December 31, 2023.

11


 

6.
FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820, Fair Value Measurements, establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 – Quoted prices in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents information about the Company’s assets measured at fair value at June 30, 2024 and December 31, 2023:

 

 

 

June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (a)

 

$

27,595,519

 

 

$

 

 

$

 

 

$

27,595,519

 

U.S. government agency securities (b)

 

 

49,301,960

 

 

 

 

 

 

 

 

 

49,301,960

 

Reverse repurchase agreements (c)

 

 

 

 

 

40,000,000

 

 

 

 

 

 

40,000,000

 

Total assets at fair value

 

$

76,897,479

 

 

$

40,000,000

 

 

$

 

 

$

116,897,479

 

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (a)

 

$

14,312,565

 

 

$

 

 

$

 

 

$

14,312,565

 

Total assets at fair value

 

$

14,312,565

 

 

$

 

 

$

 

 

$

14,312,565

 

 

a)
Money market funds included in cash and cash equivalents in the consolidated balance sheets, are valued at quoted market prices in active markets.
b)
U.S. government agency securities are valued based on observable market prices in active markets.
c)
Reverse repurchase agreements are recorded at fair market value, which is determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable.

There were no liabilities measured at fair value at June 30, 2024 or December 31, 2023.

Financial instruments including clinical trial prepayments to contract research organizations and accounts payable are carried in the condensed consolidated financial statements at amounts that approximate their fair value based on the short maturities of those instruments. The carrying amount of the Company’s term loan under the Hercules Credit Facility (as defined in Note 9) approximates market rates currently available to the Company.

12


 

7.
PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets at June 30, 2024 and December 31, 2023 were:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Deferred research and development expenses, and deposits

 

$

3,859,927

 

 

$

4,463,783

 

Prepaid insurance expenses

 

 

1,036,223

 

 

 

340,388

 

Miscellaneous prepaid expenses and other current assets

 

 

421,686

 

 

 

183,146

 

Total prepaid expenses and other current assets

 

$

5,317,836

 

 

$

4,987,317

 

 

8.
ACCRUED EXPENSES

Accrued expenses at June 30, 2024 and December 31, 2023 were:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued compensation

 

$

2,571,463

 

 

$

3,087,937

 

Accrued research and development expenses

 

 

2,411,867

 

 

 

1,687,327

 

Accrued other expenses

 

 

859,472

 

 

 

761,200

 

Total accrued expenses

 

$

5,842,802

 

 

$

5,536,464

 

 

9.
CREDIT FACILITY

The Company’s current and long-term debt obligation consists of amounts the Company is obligated to repay under its credit facility with Hercules Capital, Inc. (Hercules). In March 2019, the Company entered into a Loan and Security Agreement (Loan and Security Agreement or Hercules Credit Facility) with Hercules and several banks and other financial institutions or entities, from time-to-time parties thereto (collectively, referred to herein as Lender), providing for a term loan of up to $60.0 million, subject to the satisfaction of certain conditions contained therein, that is secured by a lien covering all of the Company’s assets, other than the Company’s intellectual property. The Loan and Security Agreement provided for (i) an initial term loan advance of up to $5.0 million at the Company’s option, which expired unutilized on April 15, 2019; (ii) three additional term loan advances of up to $15.0 million each, at the Company’s option, available to the Company upon the occurrence of certain pre-specified funding conditions prior to September 30, 2019 (2019 Tranche), March 31, 2020 (2020 Tranche), and March 31, 2021 (2021 Tranche); and (iii) a final additional term loan advance (Fourth Loan Tranche) of up to $10.0 million prior to December 31, 2021, at the Company’s option, subject to approval by the Lender’s investment committee. The 2019 Tranche was drawn down in full by the Company in September 2019 and the 2020 Tranche and 2021 Tranche expired unutilized prior to the Company satisfying the funding conditions for such tranche. On April 20, 2021, the Company entered into the First Amendment to the Loan and Security Agreement (First Amendment). The First Amendment, among other things, (i) increased the Fourth Loan Tranche from $10.0 million to $20.0 million and extended the deadline for drawing down the Fourth Loan Tranche to July 1, 2022; (ii) lowered the variable per annum rate of interest on borrowings under the Loan and Security Agreement from the greater of (a) 9.10% and (b) the prime rate (as reported in the Wall Street Journal or any successor publication thereto) plus 3.10% to the greater of (x) the Prime Rate (as defined therein) plus 3.10% or (y) 8.60%; (iii) extended the expiration of the period in which interest-only payments on borrowings under the Loan and Security Agreement are required from May 1, 2021 to July 1, 2022; and (iv) following the satisfaction of certain conditions, which conditions were satisfied in April 2021, further extended the expiration of the interest-only period and the deadline for drawing down the Fourth Loan Tranche to May 1, 2023. Repayment of the aggregate outstanding principal balance of the term loan, in monthly installments, commences upon expiration of the interest-only period and continues through October 1, 2023 (Maturity Date). The First Amendment was determined to be a modification in accordance with FASB ASC Topic 470, Debt and did not result in extinguishment.

On December 22, 2022, the Company entered into the Second Amendment to the Loan and Security Agreement (Second Amendment), which became effective as of December 31, 2022 (Second Amendment Effective Date). The Second Amendment, among other things, (i) extended the expiration of the period in which interest-only payments on borrowings under the Loan and Security Agreement are made from May 1, 2023 to May 1, 2024; (ii) extended the Maturity Date from October 1, 2023 to October 1, 2024; (iii) extended the availability of the Fourth Loan Tranche commitment of $20 million, which remained conditioned on approval by the Lenders’ investment committee, from May 1, 2023 to May 1, 2024; and (iv) amended the Prepayment Charge (as defined therein) to equal 0.75% of the amount prepaid during the 12-month period following the Second Amendment Effective Date, and 0% thereafter. In addition, a supplemental end of term charge of $292,500 (Supplemental End of Term Charge) shall be due on the earlier of (A) the Maturity Date, as amended, or (B) repayment of the aggregate amount of advances under the Loan and Security Agreement. The initial end of term charge of $1,042,500 (End of Term Charge) was paid

13


 

on October 2, 2023. The Second and Third Amendments were determined to be modifications in accordance with FASB ASC Topic 470, Debt and did not result in extinguishment.

On April 29, 2024, the Company entered into the Third Amendment to the Loan and Security Agreement (Third Amendment). The Third Amendment, among other things, extended the expiration of the period in which interest-only payments on borrowings under the Loan and Security Agreement are made from May 1, 2024 to October 1, 2024. On May 1, 2024, the Fourth Loan Tranche commitment expired unutilized.

In connection with the Hercules Credit Facility, the Company incurred a commitment charge of $25,000, transaction costs of $273,186, a fee of $375,000 upon closing, the End of Term Charge, which was paid in October 2023, and the Company will be required to pay the Supplemental End of Term Charge. The fees and transaction costs are amortized to interest expense from 2019 through the Maturity Date using the effective interest method. The End of Term Charge was amortized to interest expense from 2019 through October 2023, and the Supplemental End of Term Charge is amortized to interest expense from December 2022 through the Maturity Date, both using the effective interest method. The effective interest rate was 12.6% at June 30, 2024. At the Company’s option, the Company may elect to prepay all, but not less than all, of the outstanding term loan by paying the entire principal balance and all accrued and unpaid interest thereon plus all fees and other amounts due under the Loan and Security Agreement as of the date of such prepayment.

As of June 30, 2024, $15 million has been funded under the Loan and Security Agreement and no additional amounts were available to the Company for borrowing.

Long-term debt consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Term loan payable

 

$

15,000,000

 

 

$

15,000,000

 

Supplemental end of term charge

 

 

251,643

 

 

 

173,646

 

Unamortized debt issuance costs

 

 

(9,316

)

 

 

(27,100

)

Less: current portion

 

 

(15,242,327

)

 

 

(15,146,546

)

Total long-term debt

 

$

 

 

$

 

 

Future principal payments, including the Supplemental End of Term Charge, are as follows for the years ending December 31:

 

2024

 

 

15,292,500

 

Total

 

$

15,292,500

 

 

The Loan and Security Agreement also contains certain events of default, representations, warranties and non-financial covenants of the Company. As of June 30, 2024, the Company was in compliance with all covenants of the Hercules Credit Facility in all material respects. In addition, subject to the terms of the Loan and Security Agreement, the Company granted the Lender the right to purchase up to an aggregate of $2.0 million of the Company’s equity securities, or instruments exercisable for or convertible into equity securities, sold to investors in financings upon the same terms and conditions afforded to such other investors.

10.
STOCKHOLDERS’ EQUITY

 

In March 2021, the Company entered into an Open Market Sales Agreement SM with Jefferies LLC (Jefferies), as sales agent (2021 Jefferies Sales Agreement), under which the Company had the ability to offer and sell, from time to time through Jefferies, shares of common stock providing for aggregate sales proceeds of up to $100.0 million. As of June 30, 2024, no shares of common stock may be sold under the 2021 Jefferies Sales Agreement, and no sales had previously been made pursuant to the 2021 Jefferies Sales Agreement.

11.
INCOME TAXES

No current or deferred tax provision expenses for federal and state income taxes have been recorded as the Company has incurred losses since inception for tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

14


 

In assessing the realizability of net deferred taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740), the Company considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. Based on the weight of available evidence, primarily the incurrence of net losses since inception, anticipated net losses in the near future, reversals of existing temporary differences, and expiration of various federal and state attributes, the Company does not consider it more likely than not that some or all of the net deferred taxes will be realized. Accordingly, a 100% valuation allowance has been applied against net deferred tax assets.

Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (Section 382 and 383), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (NOLs) and certain other tax assets (tax attributes) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years). Transactions involving the Company’s common stock, within the testing period, even those outside the Company’s control, such as purchases or sales by investors, within the testing period could result in an ownership change. A limitation on the Company’s ability to utilize some or all its NOLs or credits could have a material adverse effect on the Company’s results of operations and cash flows. Prior to December 31, 2021, the Company believes it underwent four ownership changes. However, management believes that its aggregate Section 382 and 383 limitation (including the additional limitation for recognized “built-in-gains”) is sufficient so that no current impairment of its pre-ownership change tax attributes is required. The Company does not believe an ownership change has occurred from December 31, 2021, through June 30, 2024, based on a review of its equity history during that period. Any future ownership changes, including those resulting from the Company’s future financing activities, may cause its existing tax attributes to incur additional limitations.

As of June 30, 2024, the Company is subject to tax in the U.S. (Federal and Massachusetts). The Company is open to examination for the tax years ended December 31, 2023, 2022, 2021, and 2020. In addition, any loss years remain open to the extent that losses are available for carryover to future years.

The Company accounts for uncertain tax positions pursuant to ASC 740-10 which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. Accordingly, in the provision for income taxes, the Company recognizes interest accrued related to unrecognized tax benefits and penalties; however, management is currently unaware of any uncertain tax positions. As a result, the Company does not have any liabilities recorded including interest or penalties for uncertain tax positions.

The Inflation Reduction Act (IRA) was enacted on August 16, 2022. Based on review of the IRA, the Company does not expect any impact to its tax provision. In particular, the Company does not expect to pay Corporate Alternative Minimum Tax (CAMT) in the next few years based on its projected losses. The IRA introduces a 15% CAMT for corporations whose average annual adjusted financial statement income for any consecutive three-tax-year period preceding the tax year exceeds $1 billion starting in 2023.

12.
STOCK-BASED COMPENSATION

The Company approved the 2013 Equity Incentive Plan in October 2013, which was amended in June 2016 and June 2018, (Amended 2013 Plan). The Amended 2013 Plan provided for the granting of stock options, restricted stock units (RSU), stock appreciation rights, and stock units to certain employees, members of the board of directors and consultants of the Company.

In May 2023, the Company's Board of Directors approved the 2023 Equity Incentive Plan (2023 Equity Plan) to replace the Amended 2013 Plan. On June 30, 2023, the Company's stockholders approved the 2023 Equity Plan at the Company's 2023 annual meeting of stockholders. Pursuant to the 2023 Equity Plan, the Company will not make any further grants under the Amended 2013 Plan following June 30, 2023, though awards previously granted under the Amended 2013 Plan will remain outstanding. The 2023 Equity Plan is effective for a period of ten years after June 30, 2023, and a total of 5,450,000 shares of the Company’s common stock, in addition to shares of the Company’s common stock that are subject to awards granted under the Amended 2013 Plan that are outstanding as of such date and that are subsequently forfeited, cancelled, or expire before being exercised or settled in full, are authorized for issuance under the 2023 Equity Plan. As of June 30, 2024, there were 3,542,805 shares of common stock available for grant under the 2023 Equity Plan.

In 2022 the Company granted cash awards under its Management Cash Incentive Plan, as amended (the Management Cash Incentive Plan). The Management Cash Incentive Plan provides its participants with the opportunity to earn cash incentive awards for the achievement of goals relating to the performance of the Company and was adopted in 2016. The cash awards vest

15


 

in four annual installments from the date of grant based on continued service and entitle the employees to receive a cash payment, on the earlier of (i) four years from the date of grant or (ii) a change of control, equal in value to the amount by which the then value of the Company’s common stock exceeds the base value. As of June 30, 2024, $0.2 million was accrued as compensation expense for vested cash awards. There was no unrecognized expense as of June 30, 2024.

In 2022, the Company granted performance cash settled bonus awards (CSBUs) under its Management Cash Incentive Plan. As the performance criteria had been met, the awards will vest in four annual installments from the date of grant based on continued service, and entitle the employees to receive a cash payment for each vested CSBU, on the earlier of (i) four years from the date of grant or (ii) a change of control, equal in value of the closing price per share of the Company's common stock on the Nasdaq Capital Market (Nasdaq) on the payment date. As of June 30, 2024, $1.7 million was accrued as compensation expense for CSBUs as the Performance Criteria was met in February 2023. There was no unrecognized expense as of June 30, 2024.

The Company recognizes stock-based compensation expense over the requisite service period. The Company's share-based awards are accounted for as equity instruments, except for cash awards and CSBUs, which are accounted for as liabilities. The amounts included in the consolidated statements of operations relating to stock-based compensation associated with the two equity incentive plans, cash awards, and CSBUs are as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Research and development expenses

 

$

1,034,174

 

 

$

862,370

 

 

$

1,898,358

 

 

$

3,053,738

 

General and administrative expenses

 

 

901,355

 

 

 

711,170

 

 

 

1,586,008

 

 

$

2,710,157

 

Total stock-based compensation expense

 

$

1,935,529

 

 

$

1,573,540

 

 

$

3,484,366

 

 

$

5,763,895

 

 

Stock Options

The table below summarizes activity relating to stock options under the incentive plans for the six months ended June 30, 2024:

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price

 

 

Weighted
Average
Contractual
Term
(Years)

 

 

Aggregate
Intrinsic
Value(a)

 

Outstanding at December 31, 2023

 

 

5,868,816

 

 

$

6.40

 

 

 

6.44

 

 

$

3,996

 

Granted

 

 

2,376,328

 

 

$

3.67

 

 

 

 

 

 

 

Expired

 

 

(179,897

)

 

$

7.90

 

 

 

 

 

 

 

Forfeited

 

 

(31,506

)

 

$

4.49

 

 

 

 

 

 

 

Outstanding at June 30, 2024

 

 

8,033,741

 

 

$

5.57

 

 

 

7.19

 

 

$

 

Exercisable at June 30, 2024

 

 

4,829,541

 

 

$

6.28

 

 

 

5.86

 

 

$

 

 

(a)
The aggregate intrinsic value in this table was calculated on the positive difference, if any, between the closing price per share of the Company’s common stock on June 30, 2024 of $3.31 and the per share exercise price of the underlying options.

 

As of June 30, 2024, unamortized stock-based compensation for stock options outstanding was $10.2 million and is expected to be recognized over a weighted average period of 2.66 years. Total unrecognized compensation cost will be adjusted for future forfeitures, if necessary.

Restricted Stock Units

The table below summarizes activity relating to restricted stock units (RSUs) for the six months ended June 30, 2024:

 

 

 

Number
of Shares

 

 

Weighted-Average Grant Date Fair Value

 

Outstanding at December 31, 2023

 

 

944,497

 

 

$

5.30

 

Settled in common stock

 

 

(212,441

)

 

 

5.33

 

Outstanding at June 30, 2024

 

 

732,056

 

 

$

5.29

 

 

16


 

 

There were no RSUs granted during the six months ended June 30, 2024. The total grant date fair value of RSUs vested was $1.1 million for the six months ended June 30, 2024. As of June 30, 2024, the outstanding RSUs had unamortized stock-based compensation of $2.8 million with a weighted-average remaining recognition period of 2.07 years and an aggregate intrinsic value of $2.4 million.

Employee Stock Purchase Plan

At June 30, 2024, the Company had 2,928,226 shares available for issuance under the 2016 Employee Stock Purchase Plan (2016 ESPP). A summary of the weighted-average grant-date fair value, and total stock-based compensation expense recognized related to the 2016 ESPP are as follows:

 

 

Six Months Ended June 30,

 

 

2024

 

 

2023

 

Weighted-average grant-date fair value per share

$

1.44

 

 

$

2.70

 

Total stock-based compensation expense

$

9,505

 

 

$

26,734

 

 

13.
LEASES

 

The Company currently leases an office used to conduct business. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. In November 2023, the Company entered into a lease amendment that extended the lease by 12 months through December 31, 2024 and contained two options to extend the term of the lease for an additional 12 months each. Each option shall be exercisable, if at all, by giving a nine month written notice to the landlord. In April 2024, the Company extended